It's been a sad week for PowerFleet, Inc. (NASDAQ:PWFL), who've watched their investment drop 12% to US$4.10 in the week since the company reported its first-quarter result. The statutory results were not great - while revenues of US$31m were in line with expectations,PowerFleet lost US$0.16 a share in the process. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the five analysts covering PowerFleet are now predicting revenues of US$116.1m in 2020. If met, this would reflect a meaningful 17% improvement in sales compared to the last 12 months. Losses are supposed to decline, shrinking 18% from last year to US$0.51. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$136.2m and losses of US$0.29 per share in 2020. So there's been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue outlook while also expecting losses per share to increase.
The average price target fell 10% to US$7.67, implicitly signalling that lower earnings per share are a leading indicator for PowerFleet's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values PowerFleet at US$12.00 per share, while the most bearish prices it at US$4.00. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting PowerFleet's growth to accelerate, with the forecast 17% growth ranking favourably alongside historical growth of 14% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.8% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect PowerFleet to grow faster than the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at PowerFleet. They also downgraded their revenue estimates, although industry data suggests that PowerFleet's revenues are expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for PowerFleet going out to 2021, and you can see them free on our platform here..
Before you take the next step you should know about the 3 warning signs for PowerFleet (1 is concerning!) that we have uncovered.
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